Tampa to discuss raising property tax rate for first time in 29 years

TAMPA — The last time Tampa raised its property tax rate, the president was George H.W. Bush (the dad) and gasoline cost 97 cents a gallon.

Since then, not raising the tax rate has been an article of faith at City Hall.

But that could change this year.

On Thursday, Mayor Bob Buckhorn will present a proposed 2018 budget to the City Council that could total $900 million or more. He also will ask the council to consider raising the city's property tax rate for the first time since 1989.

"We're going to have the discussion," he said. "The decision that council will be asked to make is, after 29 years, do we look at a millage increase? ... It will ultimately be up to the council."

Property tax bills are based on two factors.

The first is the tax rate — known as millage — levied by local governments, School Boards and other agencies such as the port, children's board and water management districts. In Tampa, the tax rate is 5.7326 mills — or about $5.73 in city property taxes for every $1,000 of assessed, non-exempt property value.

That means the owner of a homesteaded house assessed at $154,699 pays an estimated $600 a year in city taxes.

The second factor is the assessed value of the property being taxed. As the value of property rises in value, it generates more tax revenue for local governments, even if the millage rate does not change, too. (Thanks to Florida's Save Our Homes limit, the growth of homeowners' assessments is capped at 3 percent. The growth in assessments for rental property, commercial property, vacant land and new construction is not subject to the Save Our Homes cap.) As a result, cities and counties with growing taxable values have effectively raised property taxes in recent years even if they kept the same millage rates.

Buckhorn said he wouldn't talk about how much the property tax rate could rise until he presents his proposed budget to the City Council at 9 a.m. Thursday.

"Once we lay out the numbers for them, I think the path will be pretty clear," he said.

Florida Department of Revenue statistics show that Tampa is one of three Florida cities — along with Hialeah and Fort Lauderdale — with populations over 100,000 that have not raised their millage rates since 2008. Orlando's rate went up 1 mill in 2014. St. Petersburg raised its rate in 2012 and has since lowered it a bit. Clearwater passed an increase in 2009.

So why have this discussion now?

It's not so much what's happening this year. To the contrary, taxable property values in Tampa have grown a healthy 9.3 percent. That was a pleasant surprise for city officials who had expected 8 percent growth.

Instead, Buckhorn said, it's what's coming in the future: some long-deferred debt payments, the likelihood that voters next year will expand the homestead exemption, declining revenues from sources other than property taxes and the possibility of an economic downturn.

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"The difficulty in this budget is thinking two, three, four, five years down the road," Buckhorn said. "What I'm trying to do is not build a budget for this year but prepare for the out years, even though I won't be the mayor. ... If the tough decisions have to be made, I'd rather it be me than putting the burden on the next mayor."

Big bills coming due

In 1996, then-Mayor Dick Greco needed to get the Police Department into a new headquarters, build a couple of police district substations, buy new fire engines and build a fire and police communications center.

But City Hall wasn't flush with cash and was on the hook to help pay for the Florida Aquarium and a downtown hockey arena. Raising property taxes was a non-starter.

So Greco asked the council to approve borrowing about $24 million, with repayment to be delayed 20 years. No one liked the idea, but the council approved it 5-to-2. Then-council member Bob Buckhorn voted yes, though not before asking whether the city could somehow tap the fire and police pension fund for help. (No.)

Now, Buckhorn acknowledges, "the chickens have come home to roost."

The city will pay $6 million on that 1996 debt this year, and $13.8 million a year for several years after that.

On top of that, the city has to repay a 1997 federal loan of $6 million borrowed to help develop the Centro Ybor shopping and movie complex.

Dropping revenues

While property values (and revenues) are rising, they're still well below their pre-recession peak of $166.2 million.

This year, property taxes — the city's biggest single source of revenue — are projected to bring in $155 million, which is less than the cost of running the Police Department alone.

Meanwhile, other revenues have fallen or could drop:

• In 2009, the city got $29.9 million from a communications services tax on land-line telephones. This year, with cell-phone users cutting the cord, that tax will bring in $18.1 million.

• With lower interest rates, the city earns less on money it holds before it has to be spent: Interest earnings were $23.6 million in 2008. They're $2.8 million this year.

• President Donald Trump's proposed budget threatens to eliminate several federal programs, including the transportation grants the city used to finish the Riverwalk, Community Development Block Grants, which can be used for a variety of local efforts and Choice Neighborhood grants, which provided $30 million for the Encore Tampa redevelopment project near downtown.

• The Legislature has scheduled a 2018 referendum on expanding the homestead exemption. Tampa officials assume it will pass, and estimate that it will reduce property tax revenues by $6 million. Buckhorn said other bills proposed in the Legislature this year could be back again next year, and if passed, could restrict the city's ability to borrow money, raise the millage or maintain reserves.

"We're absolutely more reliant on property tax revenues, because many of those other sources are drying up," Buckhorn said.

The business cycle

While construction and real estate are booming now, that could change.

"At some point, you've got to recognize that if you're continue to invest in projects (like) parks and rec, you've got to increase revenue," Buckhorn said. "You can't just rely on the increase in property values if you're going to build a long-term plan, because that's going to fluctuate. We were lucky this year that we had 9.3 (percent growth). Next year that could drop to 5 or 6 or 7 (percent)."

Going into Thursday's meeting, Buckhorn has alerted council members what's coming, though he hasn't shared details on the how much of a millage rate increase he could propose.

Given the seriousness of the idea, it's good that Buckhorn is putting it out there this year, said Harry Cohen, who chairs the council's finance committee. If it were his own family's finances, he said, he would want to start thinking about the possibilities well in advance.

"This is a very, very serious thing to talk about doing," Cohen said. "The details will ultimately guide the discussion. The ultimate question is, are the investments that are being proposed worth making?"

Contact Richard Danielson at rdanielson@tampabay.com or (813) 226-3403. Follow @Danielson_Times